California QFs want past due bills paid

Ann de Rouffignac
OGJ Online

HOUSTON, Mar. 29, 2001—Most of California’s qualifying facilities or QFs remained off line Thursday dissatisfied with the rate action state regulators took this week intended to coax them into producing electric power for the grid.

The California Public Utilities Commission hiked retail rates by 3 cents/kw-hr Tuesday and ordered utilities to pay the QFs for power produced going forward. But the order apparently was unconvincing because a number of QFs were still off line, said Patrick Dorinson, spokesman for the California Independent System Operator.

The QFs are smaller renewable and gas-fired cogeneration plants with contracts to sell power directly to the investor-owned utilities. With a nameplate capacity of 9,700 MW, they have proved vital to satisfying the state’s electricity needs. But the grid operator counts on only about 6,000 MW of the total, because the balance comes from more unpredictable wind and solar projects.

Many QFs shut down after cash-strapped Southern California Edison Co. and Pacific Gas & Electric Co. stopped paying them several months ago. The cumulative debt owed these facilities tops $1.5 billion, according to a creditors’ committee. In a statement, the QFs called the PUC action “progress,” but said it didn’t go far enough.

The PUC did not order the utilities to pay the QFs $1.5 billion owed as of Mar. 8 for November, December, and January. That sum will be even more when February and March are taken into consideration, said Gary Ackerman, spokesman for Western Power Trading Forum.

“It is disappointing and frustrating to us that despite such a large rate increase the state is still unable to assure Californians that providers [QFs] of clean, renewable electricity will receive payments to help keep the lights on,” the Renewable Energy Creditors Committee said in a statement late Wednesday.

Several QFs, including Coram Energy Group LTD, a small wind producer, formed a creditors committee to examine options concerning the money owed them by Southern California Edison Co. and Pacific Gas & Electric Co. The committee was reportedly circulating a petition to force Southern California Edison into involuntary bankruptcy. Jay Lawrence, a spokesman for the committee, Thursday would not confirm such a petition exists.

Worse than expected
“We never expected it to get this bad,” said Coram Energy’s Pam Walder. “We haven’t gotten a check yet.”

The creditors’ committee also complained the PUC action doesn’t guarantee the QFs will get paid in the future.The rate hike is also dedicated to paying the California Department of Water Resources for power it purchases on behalf of the utilities.

“It is not clear, after the state receives its cut, whether Edison and PG&E will have the funds to make payments to renewable energy providers on a going forward basis,” the committee said. The committee also noted the PUC rate formula does not resolve issues of price volatility.

Southern California Edison will pay 7.9 cents/kw-hr to the QFs for energy, plus an additional capacity payment, Ted Craver, CFO of Edison International, said during a Tuesday conference call with bondholders. Craver said Edison expects to pay QFs about $200 million/month going forward.

“This new formula results in significant price concessions from what Edison and PG&E should be paying under PURPA,” the QF creditors’ committee said. The Public Utility Regulatory Policies Act of 1978 governs QF contracts.

The QFs also complained because the PUC changed the index that governs the price they get for gas. Previously, prices were indexed to transactions at TOPOCK, a hub in southern California. But because the price of gas is higher on average at that trading point, the PUC shifted the index to Malin on the California-Oregon border where prices are lower. To compensate for the difference, regulators will add some intrastate pipeline charges to gas payments.